chapter4-2-金融工程专业无文字.ppt

Chapter 4Futures and Forwards Prices II Three kinds of underlying investment assets: ⑴、Investment assets providing no income ⑵、Investment assets providing a known cash income ⑶、Investment assets providing a known dividend yield Develop pricing models for forwards when the underlying asset has cash flows associated with it during the period of the forward contract. 2.2 forward price for an investment asset providing a Known Cash Income Intuition 1 To see this, consider a security that had a perfectly predicable set of cash flows that will occur between 0 and T. Denote the present value of those cash flows as I (discounting at the risk free rate). From the short party’s perspective :buy one unit of the asset and enter into a short forward contract to sell it for F0 at time T. This cost S0 and is certain to lead to a cash inflow of F0 at time T and income with a present value of I. A formal prove Assumption:The underlying asset will provide income with a present value of I during the life of a forward contract. Consider the following portfolios(at time 0 ): Portfolio A: a long forward contract and a cash amount of on hand. Portfolio B: one unit of underlying asset and a cash amount of I borrowed at risk-free interest rate. Continued This is the forward price for an investment asset providing a known cash income (present value I). Reexamine The Formula We could attribute this formula to the notion opportunity cost that the short party faced: to induce the short party to enter into the contract the long party must pay them interest at least in the amount that the short could get if they simply sold the asset now and invested it at the risk-free rate. Reexamine The Formula Recall, however, that during the period of the forward contract, if the short party physically holds the underlying asset providing a known cash income, then they will garner any benefits that accrue to the asset during that period. For example, if the forward contract